GST slows down designer jewellery sourced from hubs

The 21st GST Council meeting has put a spanner in job work carried out in the jewellery sector. Registered principals will find it tougher to get work done from job workers who are unregistered and located outside the state.ET Bureau | September 28, 2017, 08:31 IST

Movement of jewellery from manufacturing hubs in the country is likely to slow down following the GST Council's decision to not exempt inter-state taxable supply of job work service in the jewellery sector from compulsory GST registration.

Earlier, a job worker making inter-state taxable supply of job work service was not eligible for threshold exemption of Rs 20 lakh (Rs 10 lakh in special category states, except Jammu & Kashmir) and was liable for compulsory registration under GST.

However, at the 21st GST Council meeting in Hyderabad last week, exemption from registration was recommended for the above category of job workers engaged in making inter-state taxable supply of job work service to a registered principal as long as goods move under the cover of an e-way bill, irrespective of the value of the consignment.

"This exemption was not extended to job work in relation to jewellery covered under chapter 71, which do not require e-way bill," said Nitin Khandelwal, chairman of All-India Gem & Jewellery Trade Federation. The gems and jewellery sector gets finished products from job workers in different states and who have specialised skills.

For instance, 'meenakari' jewellery is prepared by artisans of Varanasi while 'filigri' jewellery is a specialisation of Kolkata artisans.These artisans are concentrated in places like Kolkata, Gujarat, Rajasthan and Varanasi. "Goods sent to these artisans are by the principal who is generally located outside the states," said the GJF chairman.

Bhavin Mehta, a chartered accountant who deals with the gems and jewellery sector, said the principals who are registered under the GST Act and who fol low the procedure for movement of inputssemi-finished goods to the artisans as outlined in Section 143 of the CGST Act, 2017 should be allowed to procure services, even from job workers who are unregistered and located outside the state.

"On receipt of services from unregistered job workers, the principal shall pay IGST, keeping in mind the provisions as outlined in Section 5(4) of the IGST Act. As the principal who is registered under GST is bound to follow the procedure as outlined in Section 143 of the CGST Act, even the audit trail shall be achieved," Mehta said.

Khandelwal said restriction to work within a particular state would hamper business.